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Freelance writer: File self-employment tax forms, unemployment benefits or both?

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There's a love/hate relationship for writers who have chosen to freelance* while collecting unemployment insurance.

Collecting unemployment insurance requires the following guidelines: you have lost your job through no fault of your own; you have earned wages in insured employment; you are available for new work**; you are actively seeking new work.

If a freelancer makes more than $400 annually, she is legally obligated to file a Schedule SE Self-Employment Tax form. And if she makes $400 or more weekly or monthly, chances are slim to none that she will be able to collect unemployment insurance regardless of this salary being considered low income in the state of Illinois.

An annual salary of this amount is $20,800 but only $4,800 if a worker makes $400 per month. Both amounts are under the $41,900 limit for a one-person household in Cook County.

Assuming the freelancer held a job that paid for unemployment insurance and was laid off or voluntarily quit (but with good enough reason to earn unemployment insurance anyway), her weekly unemployment income may vary.

As an example, let's say her unemployment insurance weekly benefits are $411 (without 10 percent federal tax of $41.10 and 5 percent state tax of $20.55, totaling $349.35) but she made $420 one week as a freelancer. Every two weeks, she must certify her total earnings online (or in person). It is possible that the Illinois Department of Employment Security (IDES) may call her with questions about her income or automatically kick her off for weekly benefits if she makes more than her allowed income. Or, they'll deduct part of it.

The issue with freelancing is clients tend to pay in lump sums instead of spreading payments out through the month so while she may make $420 this week, it's possible to make $50 or $0 the next week depending on her workload.

But be honest on all unemployment forms. Again, once she files her SE form during tax season, her total income will come into question again. This is in addition to having to report any unemployment income she collected, as well as whether she chose to have federal and state taxes withheld from unemployment insurance and self-employment taxes.

Keep tabs on any extra income, as well as any incurred expenses. Keep all receipts and/or any bills that are solely used for the purposes of a freelancing business. SE forms also take into account expenses versus profits. If a freelancer spent more than she's earned as a freelancer and her profits are not $400 or more, she will not have to file this form. But that still does not change how much she made on a weekly basis while collecting unemployment insurance benefits and will have to be documented on any tax forms.

* For the purpose of this article, "freelance" will focus on "freelance writers" or "freelance reporters."

** In the City of Chicago, the most popular job industry is professional, scientific and technical services, according to City Data.

Follow Shamontiel on Pinterest for all her latest Chicago finance, employment and savings tips, or subscribe to her Chicago Personal Finance channel at the top of this page.

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